Ask a Mortgage Broker – Part 4 – Continuing our Q&A with Questions Provided by First Time Homebuyers, South Orange County Realtor Adrienne Markes and I wrap up our Conversation
- Are You Working With a Professional?
- Working with a Mortgage Broker
- First Time Home Buyer Questions
- How Do I Get Pre-Approved?
- The Difference Between Pre-Qualified and Pre-Approved
Are You Working With a Professional
Adrienne Markes is a Realtor in South Orange County, San Clemente area of California. Adrienne put the question out to her social media following to collect questions to “ask a lender”.
Adrienne is a professional that understands the value of educating and empowering consumers. It’s crazy that you should be afraid to talk to a loan officer because they typically come off as pushy and salesy…..You’re not wrong. It’s gross.
Any lender that you hear about on TV, or through an advertisement of any kind, is dumping you into a call center, and you’re connected with someone trying to meet their sales quota for the month.
As a professional independent mortgage expert, sharing what I’ve learned in over 20 years in the business is the best way that I can give back, and try to help consumers avoid the challenges that so many run into when they get tricked into working a call center lender.
The fact that Adrienne is committing her time and energy to educate and empower consumers should go a long way toward earning your trust. She is a true professional in my opinion.
Working with a Mortgage Broker
If you’re a first time home buyer, you may or may not know the difference between a depository bank, credit union, direct lender, and mortgage broker. The short and quick of it is that depository banks, like where you deposit your paycheck, do not specialize in specializing.
Depository banks and credit unions typically have pretty tight guidelines for lending.
While many people feel comfortable getting a mortgage from the place where they deposit their pay checks, my professional experience is that their ability to be creative when it’s required is limited.
I’m typically ok if the depository bank admits that you don’t meet “their guidelines” and that if you go to a mortgage broker you would qualify. Most loan officers do not have that level of common decency.
Direct lenders suffer from massive overhead and middle management. The way that direct lenders have had to grow their business over the past 10 years has left these organizations with massive overhead, which is passed through directly to consumers in the way of high interest rates and lender fees.
I always feel better if you’re working with a professional, or an expert at the specific situation that you may present, and there are definitely some great loan officers that work at a direct lender. But if you can find that same professionalism or expertise from a mortgage broker, you should always get a second opinion.
Independent Mortgage Brokers tend to be entrepreneurial. We are typically small business owners, and we build our business around a commitment to that kind of high level personal service that only a relationship with a seasoned professional will give you.
Independent mortgage brokers like BuyWise Mortgage have low overhead, no lender fees, access to wholesale interest rates that will often be much lower than if you went to a depository bank, credit union or direct lender.
First Time Homebuyer Questions
In total, this was a one hour interview. We’ve broken it up into four separate videos so that it’s easier to consume, and more relevant to what you want to learn about. This particular segment, we talk about credit scores, and what’s required to qualify for a mortgage.
More Questions and Answers from First Time Homebuyers:
- Ask a Mortgage Broker 1 – Downpayment & Closing Costs
- Ask a Mortgage Broker 2 – Debt to Income Ratios
- Ask a Mortgage Broker 3 – Credit Qualifying Q&A
Hi, good morning everybody. My Name’s Adrian Marks and today I wanted to partner with Scott Shang who is one of my lender friends. I had this idea a couple of weeks ago and some of you actually helped me with this.
I posted them Instagram a question to you guys to ask whatever questions you had about getting qualified for a home loan or buying a house. So after I compiled the questions, I got with Scott and he graciously agreed to let me interview him to get all of your questions answered. So, Scott, why don’t we get started?
Absolutely, and thank you so much for having me here. This is so much fun. When you told me what you did I was just so excited because any opportunity that we have to answer questions and to help consumers when they’re not face to face with a salesperson and feeling like they’re being pressured or feel like they’re being told or asked what the salesperson wants to them to hear.
So this is super, super cool. And I think this is indicative of the type of professional that you are. So it’s an absolute honor and I appreciate you having me on here. Yeah.
So you want to dive right into it?
How Do I Get Pre-Approved?
It has to do with getting pre-approved, so very basic starting point. How do I get pre-qualified?
I mean getting pre-qualified is super easy. The scariest thing is talking to a salesperson and that’s what people are afraid of. They’re afraid of talking to somebody and committing to something. These days, everything is done digitally. We have online applications.
You can upload PDFs of your pay stubs. It’s real simple. There should be no cost. If somebody is charging you to get pre-approved, I would go elsewhere. It’s not necessary. You’re going to complete a loan application. The lender is looking at your two-year history of employment.
They’re looking at a two-year history of your income. They’re going to pull your credit and see what your credit history is. And then from there, that’s going to tell us what your debt to income ratio is. What your income is.
It’s going to tell us what your maximum payment is, and then from that maximum payment, based on your down payment and what interest rates are, you’re going to back into the maximum purchase price that you qualified for.
It’s a simple process. It should take 10 to 15 minutes maybe to do the application and put that stuff together, and provide all that information. What I would highly recommend, there’s a big difference between being pre-qualified and pre-approved.
And what you want to be careful of is you giving people information over the phone and them telling you you’re pre-qualified because there are so many moving parts. If you have not sent them your pay stubs and your W2’s, you are not pre-approved because there’re so many things that can show up on that that we just don’t know.
Here’s a perfect example. This seems silly. It seems silly that I even have to say this, but I cannot tell you, I could retire if I got a dollar for every person that was told one thing, and then when the underwriter actually got their credit package they weren’t approved anymore and then they go online, they Find Findmywyhome.com and they end up calling me and they go, “Help, what do I do?” You got to get that information in there.
For instance, maybe you drive for Uber and you have a full-time job. So you make approximately $7,000 a month, and your lenders on the phone and they Say, “How much you make?” You say, “Oh, I make about $7,000 a month,” but when an underwriter looks at that, you’re not going to get credit for the Uber driving unless you’ve been doing it for two years and reporting and on your taxes.
And then you’re going to average it over two years so your income is actually way less, which means that the amount of loan that you qualify for is way less. So be very, very careful. Absolutely, submit all of your information. You are not pre-approved until you’ve submitted all of your information.
Now, we can go one step further and we can do an automated underwriting approval. We can actually run it through Fannie Mae and get an underwriting approval. Again, it’s conditional based on everything that’s on the application, being able to document it and come up with it. But getting pre-approved should be super simple.
Shop for the loan officer or the lender first, right? So the very first thing you’re doing is you’re building a relationship. This is very much a relationship-based business. If you’re in south Orange County, talk to your Realtor, right?
Ask your Realtor, do you have a lender that you trust? Yes, absolutely, if that’s where the conversation starts. So you are already showing people that what you care about is educating consumers so that they’re making more informed decisions about the buying process. And that’s what we’re doing here.
So it was for me, that’s the first hurdle for trust. So I would go to you and I would say, “Wow, I asked this question. You got on experts, you answered all of these questions. Who do you know that can maybe help me with this?” Shop for the loan officer first.
Again, if they work at a direct lender, also talked to a broker just so that you get that difference. Maybe talk to a depository bank, like wherever you bank or credit union or something like that, they are going to be different, and that’s really the first step.
But really to get started, you’re going to need pay stubs and W2’s. In some cases, you’ll need tax returns. Some cases you’ll need bank statements. Other than that, all of that you’re uploading into a secure portal and you’re doing everything online.
It’s about a 10-, 15-minute process. It’s free, it’s easy. It’ll give your loan officer everything they need to determine exactly what you qualify for. So super simple deciding who to start with.
That’s the most important part. That’s the most important part. Let me go ahead and go into this and a little bit of a rabbit hole, but I think this is something that’s really important is when you’re a home buyer and they contact you or they contact me, we have to interview for the job of working for you.
Just because you don’t pay us out of your pocket doesn’t mean that you’re not hiring us to do a job for you. And you should treat those vendors like you’re hiring them and you should hold them accountable and make sure that they’re being responsible as though you are paying them because you are paying them with the biggest investment in your life. Right?
We get paid. I get paid from the lender. You get paid from the seller if we’re representing the buyer in the situation. So don’t fall for these TV commercials. TV commercials that is absolutely the worst place you can ever go for a mortgage. They have the least amount of experience and they’re the highest cost. They got to pay for those commercial somehow.
Right? So the all that talent’s not cheap. So really find the person first, get a reference or get a referral, talk to different people. People first, then go to programs. So I guess that’s all I got on that.
The Difference Between Pre-Qualified and Pre-Approved
Okay. Well, and I’m glad that you made the distinction between pre-qualified and pre-approved. Most sellers do want to see that you’ve been pre-approved when we’re submitting offers. So it’s good for people to know that there is a difference and how it could affect them on the offer side. So that kind of loops into the next one, very similar. Do I need to talk to a bank or a lender before I go looking at homes?
Yeah, the answer is absolutely. I mean if you want to window shop, go online, but don’t waste your time or anybody else’s time window shopping if you have no idea if you can afford that home. Now, most people I don’t think are going to do that.
I think, more importantly, the reason why you want to be fully approved first is when … Homes go quickly, right? So if there’s a desirable home that’s for sale and it just comes on market and you’re lucky enough to get in there and be one of the first people you want to be in a position to be able to make a very strong offer as quickly as possible.
First to offer, it could potentially give you an advantage. So if we’re talking about in terms of giving yourself the highest advantage, because here’s what happens.
You go out, you show them the property, it’s a gorgeous home. They absolutely fall in love with it. Well, okay now you got to go get pre-approved. So now you’ve got two days that go by while you’re shopping for the lender, you’re submitting all your information, you’re getting it approved, getting back the pre-approval letter, that’s two days that other people are making offers in front of you.
That could put you at a disadvantage. Absolutely, 100% get pre-approved first because as a home buyer, that’s going to put you in the highest and best possible position for acting quickly, making good decisions and making decisions within the context of what you know your flexibilities are.
Here’s another example, is let’s say you’re qualified for a different amount than what you’re making an offer for. And you’ll know that you have that flexibility. You can make a little bit higher offer or a little bit more aggressive offer. It’s just silly. It’s kind of like going to the store and not bringing your wallet, right?
If you see something that you fall in love with, you couldn’t pay for it. If you had to, you got to drive all the way home to get it and then maybe it’s not available when you get back. It’s the same thing with houses.
You should first and foremost, absolutely know what you can afford, and then you should be prepared to act quickly if you find the home that you love because it’s moving a little bit more towards a buyer’s market right now.
Buyers have a little bit less competition but in a cyclical market, well, actually in a couple months here, right? In the summertime, there’s going to be a lot of buyers out in the summertime, and if you’re not prepared to make an offer, you could have a very difficult time getting, getting your offers excepted, it could take a long time if you’re not prepared.
Absolutely, 100% get pre-approved. Get that blank check in your pocket before you go out shopping so that you put yourself in a position to move quickly if you have to.
Well, I’m glad to hear you say that because we are very much in sync. That is typically what I share with my clients, the first step is to get pre-approved so that we know where we should be looking and that we’re prepared when we come across a house that they love and want to call their own. That’s awesome.
The only other thing I would add to that is don’t be afraid if your Realtor asks you to get cross-qualified. What cross-qualified is potentially maybe you’re selling a home and a buyer comes up and you want me to look at the thing or your lender, whoever your lender is. “Hey, look at this, just a double check and make sure they’re pre-approved.” That’s not uncommon at all.
So you want to be prepared for that and that’s why you want to have your loan secured and you want to be with a good lender because you just don’t know. It’s entirely possible that if you try to make an offer, the seller of the home’s going to require that you talk to another lender.
So already being pre-approved and then you just put them in touch with your lender and we talk to their lender and give them what they need and they say, “Oh, okay good.” Because there’s a lot of people out there that aren’t doing a great job so I just want to make sure that if we accept this offer, everything’s going to go smooth.
Right. Right. And that I have had that situation come up many times and like you said, it’s okay. Have your lender contact their lender. You don’t even have to be involved.
There’s no pressure. But yeah, that’s totally good and it is good for both sides to know that yeah, this person is solid and we can move forward. Good tip there Scott. That has pretty much rounded up all of the questions that I’ve collected so far and I really appreciate it.
Oh, well I can put out there and I guess for any of you watching if you have any questions that we haven’t covered, feel free to reach out and let us know.
We have talked about maybe continuing this type of dialogue so that we can share information with all of you as questions come up where we think, “Gosh, that’s a really good question.” Other people probably have that same question.
So let’s share the information. So if there’s a question that we didn’t cover that you do have, feel free to send a message and we’ll make sure that we get back to you with the answer and we’ll also include it to share with others in the future. So, Scott, thank you.
I know that this took some preparation and some time out of your day but I think it’s going to prove to be really beneficial for people that are out there wondering about these things. And so I really appreciate it.
Yeah, they were great questions. Thank you very much for doing this and inviting me on and I’m sure we’re going to be able to help some homeowners or some home buyers out there ask better questions and hopefully, work with better professionals.
Yeah, absolutely. So okay, well, I guess it’s time for us to stop now.
Thank you so much, and we’ll see you soon.
Thank you. All right. Bye. Bye.